Global markets showed mixed performance on Tuesday following US President Donald Trump's announcement to pause planned attacks on Iran. According to reports from Reuters, Trump said he had halted a planned resumption of attacks against Iran to allow time for negotiations to take place on a deal to end the war, after Tehran sent a new peace proposal to Washington. The President subsequently stated there was 'a very good chance' the US could reach an agreement with Iran to prevent Tehran from obtaining a nuclear weapon. As per Reuters, market analysts noted that 'We've seen a lot of back and forth already,' and until actual action happens in the Strait of Hormuz where ships pass through safely, the market is shrugging off commentary from either side. Fabien Yip, a market analyst at IG, emphasized that 'Until we actually see real action happening (in the Strait of Hormuz), whereby ships are passing through safely and we see a material rebound in the numbers of traffic going through in the Strait, I think the market in general is shrugging off the commentary from either side.'
Major US stock indexes fell as bond yields rose again on Tuesday, with the Dow Jones Industrial Average falling 170.38 points, or 0.34%, to 49,515.42, the S&P 500 declining 47.16 points, or 0.63%, to 7,356.14, and the Nasdaq Composite dropping 255.26 points, or 0.98%, to 25,835.47. According to Reuters, the Nasdaq led declines on Wall Street, with the all-important artificial intelligence trade facing testing as earnings from chipmaker Nvidia are due on Wednesday. Peter Cardillo, chief market economist at Spartan Capital Securities, noted that 'The focus for investors right now is on rising yields, and the long end of the market continues to rise. That is the reason why we're seeing (stocks) on the defensive, and why what would have been good news is somewhat being ignored.' The yield on benchmark US 10-year notes rose 4.6 basis points to 4.669%, from 4.623% late on Monday, with the 10-year yield having climbed as high as 4.659% on Monday, which was its highest level in 15 months.
Oil markets experienced significant declines following Trump's diplomatic announcement, with prices falling nearly 2% on Tuesday. As reported by Reuters, US crude fell 0.52% to $108.09 a barrel while Brent crude futures fell to $110.26 per barrel, down 1.64% on the day. The more active July contract CLc2 fell $1.15, or 1.1%, to $103.23. Both crude prices remained more than 50% above their pre-war levels, indicating the market's cautious optimism about potential diplomatic resolution. The decline in oil prices helped stem a steep selloff in global bonds that had been experiencing significant pressure, though worries remain about any lasting inflationary shock from the Iran war. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.2% overnight as oil prices retreated from recent highs. Tim Waterer, chief market analyst at KCM Trade, noted that 'While Trump's signal has eased some immediate pressure, the fundamental risks persist .... The market is now watching whether Trump's comments represent a genuine shift toward de-escalation or just a tactical pause.'
European stocks demonstrated resilience with a 0.7% rise, further recovering ground lost on Friday when they dropped 1.5% as bond market jitters spread to equities. According to Reuters, stocks in Europe, which is a net importer of energy and has fewer major tech firms, remain below pre-war levels and have lagged far behind their US peers. The pan-European STOXX 600 index rose 0.3%, with the recovery reflecting investor optimism about potential diplomatic progress in the Iran situation. European markets have shown particular strength compared to their US counterparts, benefiting from their position as net importers of energy and having fewer major technology firms exposed to AI-related volatility. Richard Reyle, chief investment officer at Questar Capital Partners, noted that 'Nvidia is the market's shorthand for everything AI and this market's gains have been driven in large part by AI over the past few years.'
The fall in oil prices helped stem a steep selloff in global bonds on Tuesday, with yields on the benchmark 10-year US Treasury note easing from a more than one-year high above 4.63% to 4.61%. As reported by Reuters, British bond yields fell after news reports said the most likely challenger to Prime Minister Keir Starmer will not overhaul the country's borrowing rules. Markets are now pricing in rate hikes from major central banks this year on expectations policymakers will have to tighten policy to combat a resurgence in inflation driven by higher-for-longer energy prices. Florian Ielpo, head of macro at Lombard Odier Investment Managers, observed that 'Markets are still trading the same uncomfortable balance' with the micro story remaining strong but the macro story becoming less forgiving due to rising oil prices and bond yields. According to Lombard Odier Investment Managers, 'The micro story remains strong, with AI still acting as the main support for US equities, but the macro story is becoming less forgiving.'
